Chapter 1 The Information System: An Accountant’s Perspective Accounting Information Systems, 5 th edition James A. Hall COPYRIGHT © 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license

The Evolution of Information System Models Five Models See page 27

Manual Process Model Transaction processing, information processing, and accounting are physically performed by people, usually using paper documents. Useful to study because: –helps link AIS courses to other accounting courses –often easier to understand business processes when not shrouded in technology –facilitates understanding internal controls

The Evolution of IS Models: The Flat-File Model See page 27-29

Data Redundancy Problems Data Storage - excessive storage costs of paper documents and/or magnetic form Data Updating - changes or additions must be performed multiple times Currency of Information - potential problem of failing to update all affected files Task-Data Dependency - user’s inability to obtain additional information as needs change Data Integration - separate files are difficult to integrate across multiple users The Evolution of IS Models: The Flat-File Model See page 29

The Evolution of IS Models: The Database Model See page 30

REA Model The REA model is an accounting framework for modeling an organization’s –economic resources; e.g., assets –economic events; i.e., affect changes in resources –economic agents; i.e., individuals and departments that participate in an economic event –Interrelationships among resources, events and agents Entity-relationship diagrams (ERD) are often used to model these relationships. See page 31

34 Inventory Line items Sales Party to Sales person Pays for Cash Collections Increases Cash Made to Customer Cashier Received from Received by M 1 M M M M M M M M R E A An REA Data Model Example

Accountants as Information System Users Accountants must be able to clearly convey their needs to the systems professionals who design the system. The accountant should actively participate in systems development projects to ensure appropriate systems design.

Accountants as System Designers The accounting function is responsible for the conceptual system, while the computer function is responsible for the physical system. The conceptual system determines the nature of the information required, its sources, its destination, and the accounting rules that must be applied.

Accountants as System Auditors External Auditors –attest to fairness of financial statements –assurance service: broader in scope than traditional attestation audit IT Auditors –evaluate IT, often as part of external audit Internal Auditors –in-house IS and IT appraisal services